Tuesday, January 01, 2008

Eclipse Aviation Completes First 100 Airplanes Faster Than Any General Aviation Jet Aircraft Manufacturer in History

VLJ leader sets record by certifying more than 100 Eclipse 500s in only 12 months

ALBUQUERQUE, NM -- January 1, 2008 -- Eclipse Aviation, manufacturer of the world's first very light jet (VLJ), today announced it has produced and certified 104 Eclipse 500s since December 31, 2006. Reaching this milestone makes Eclipse the fastest general aviation jet aircraft manufacturer in history to produce its first 100 airplanes. The VLJ leader completed a total of 103 aircraft in 2007. Previously, the fastest ramp to 100 aircraft was achieved by Cessna, which reached 100 Cessna Citation 550 aircraft after approximately 18 months.

"We're transforming how jets are built, and how people travel," said Vern Raburn, Eclipse Aviation president and CEO. "It's an audacious goal, and one that stretches us every day to go beyond what seems possible. Day-to-day setbacks are inevitable, but the reality is that we have created a new aircraft category and are bringing a new breed of jet to market at a rate never before seen in general aviation."

Brought forward by bob who added - They failed to mention that they told the world they would make 505 in 2007.


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Gunner said...

We have BBC also.
Now, we're BOTH worse off! ;-)


bill e. goat said...

If Vern offers to provide personal enlightenment on the order book (something about a room where there is no darkness- presumably fellowed with the BoD), I recommend one declines such hospitality.
That said (and without such personal enlightenment), I suspect the order book has reached the maximum sustainable “Verntastic” proportion. Early on, it served to support the “hype”, and it's inflation was beneficial. But it has attained a level of Verntastic quiescence:

Any further increase, and people go “Gee- with that many orders*, I'll never get an airplane (so why order)".

Any reduction in the order book, and people go “Gee- they're loosing customers (must be something wrong- better not order)".

So, I suspect it will stay both stationary, and artificial.
*And such a relatively slow delivery rate- relative to the number of orders, not to the delivery rate of competitors such as Mustang; which it has sort of doubled.

In fact, quadrupled, if you figure the delivered airplanes will be built twice, with the retrofits.

mouse said...

I always wondered why the Nimbus order never came off the books when that scam was unveiled, and nobody questioned those 1000 airplanes?

baron95 said...

Flyger said... I've heard that the total life cycle cost, to the manufacturer, for liability and to deal with the lack of redundancy in other systems is about the same as the cost of the second engine.

I would not dispute this if you ran the case for a traditinal biz jet until very recently.

However, for this new class of personal planes (less than 6 seats), modern very reliable turbofans, light generators, enhanced battery for backup power, balistic parachute, advanced glass designed for single pilot operation, advanced training, mentoring programs, and the 15 year liability cap, I think liability will be a containable factor.

Add to that $100 oil $10 jet fuel in many parts of the world and $7 here, and the economics of the single engine jet just trounce the twn config in the 4-5 pax/5,000lbs class.

Now, a plane like the Piper Jet, with a larger cabin, no chute, engine placed in a way that can take off the tail in anything beyond a 1/3 rotor departing at more than 5 degrees, I agree that they may have a liability issue.

So, while I agree it is an issue, I also agree that we now have the technology to mitigate it.

P.S. I've read that a PWC or Williams exec said they'd not sell a turbfan for single-engine jets unless it had a chute. It doesn't matter if the chute saves lives or not. Having the chute puts the buyer and the juries on notice that a powerplant or other failure (e.g. electrical, instrumentation, etc) is to be expected, and the pilots trained to deploy the chute on those events. That is all that takes to break huge awards in some cases.

baron95 said...

Shane price said ... I'm not sure you understood my point.

The relative merits of small aircraft was not what I asked.

The logic of the '2,700 orders' is where I have problems.


Why will investors continue to pour the required funds into Eclipse in an election year?

It is obvious that Vern tosses around this 2,700 order book very carelessly and loosely. I never believed for a minute that they had ANYWHERE near that by my (classical) definition of "orders", which is a firm purchase contract, backed by a substantial (5%+) non-refundable deposit. I think Vern purposefully leaves it vague and mixis firm order, purchase options and LOIs for Day Jet. I would bet that the Day Jet purchasing contract include exceptions like "Subject to Day Jet securing adequate financing to purchase..." an/or "xxx Orders will be firmed yy days after Day Jet reaches zzz milestone".

So, 2,700 is prob the all time high using the most creative way of counting all orders, LOIs, options, etc. If I were to guess, I'd say the Eclipse order book is probably in the neighborhood of 700-800 firm + an equal number of options with all sorts of conditions and escape cluses.

As far as investor pouring more money in, you should not be surpised. There is "some" value to Eclipse - you can argue over what it is. The last investors coming in (particularly to bail out), just simply screw the previous investors and get controlling interest, preferences, etc. So long as they are investing less than the perceived value and getting preferences, they are golden and money flows.

You are VERY LIKELY to see Eclipse file for CH 11, erase a ton of liabilities, renegotiate lots of contracts (with vendors and buyers), with a new investor offering Debtor in Possesion financing. Don't assume that just because a company is in distress they can't get financing. Moeny can almost always be found for a "price".

baron95 said...

Gunner said ... If you agree the price of an SE should be in the range of $1-1.5 Mil, you have to agree that the EA-500 needs to be sold north of $2.0-2.2 Mill.

I am no expert on pricing jets, but I have done pricing on many products watching the prices on competing or similar products.

I start assuming that Cessna priced the Mustang for profitability at 200/year now at $3M. I beleive that If Cessna built a 70% scale of the Mustang and built volume to 400/year they could probably be profitable at 20%-30% below that price(10%-15% lower cost due to smaller size, 10%-15% lower cost due to higher volume). That would put an Eclipse sized, high volume mini Mustang at $2.1M-$2.4M. I think that is the price Eclipse will ultimately sell for once they are at a steady rate and no longer relying on investors seed money.

Remove an engine and associated systems, make it another 20% smaller for a single engine 5 pax jet and bump volumes to 600/year, and I think you can get the prices down to $1.5M with Cessna profitability.

I can see others competing with Cessna on price, price of glass cming down now that Garmin may have competition, prices of the fans coming down with Williams/PWC, perhaps even Honda/GE competing, so I can see some single engine jets being profitable at $1.0M-$1.5M in 2008 US$.

I can't see them being profitable at less than $1.0M, and I can't see there being a sustainable market if they are priced much higher that $1.5M.

I hope this makes sense.

Yes, Eclipse is priced all wrong as of now IF then need to make money from operations (selling/servicing jets) on a steady state. That should not be a surprise for anyone. The price has increased already about 100% from introductory prices to fully optioned current prices. They will rise another 40% or so, IMHO.

Niner Zulu said...
This comment has been removed by the author.
Gunner said...

"So why does Eclipse need to produce one or two aircraft per day?"

I know that's a rhetorical question, but it begs answer regardless. Eclipse needs to get up to that level of production basically because the Business Model only works if they can produce AND SELL 500+ units per year.

Vern bet on a Hi-Tech industry model...that of CREATING a market based on affordability and then BUYING market share based on getting a jump on everyone else AND selling under cost.

There's nothing inherently nefarious about the strategy. But it requires two events to follow on to introduction:

1) The Orders MUST come in to demonstrate to future round investors that you have, indeed, created a New Market

2) The Buyer Market MUST be willing to accept higher prices after initial introduction OR the Vendor Market MUST be willing to accept significantly lower prices based on volume.

People like Ken saw the Order Rate collapse well over a year ago and have worked tirelessly to try to scam others to step up, one at a time. #2 is a moot point since it's contingent on the materialization of #1.

Vern evidently keeps believing that if he can just limp enough planes out of the factory, the original plan will kick in and Orders will start flowing. He continues to buy time at the expense of credibility, however, and that becomes a Death Spiral.

The fact that the company was not agile enough to change its business plan and projections and chose, instead, to lie about everything from the Order Book to the Vendor Capabilities is what has turned Eclipse from a gutsy business venture into a seedy pyramid scheme.

As always, YMMV-

mouse said...

Good points Gunner and Shane. Ed better get it figured out too!

Park his planes at the airport and fly as soon as someone shows up, when and where they want to go, on demand, and he might survive...

A true Air-Taxi... stand at the ramp/curb and wait to be hailed... anything else is doomed for failure, and soon... IMHO

expilot said...

Gunner, Great analysis! People/Businesses do not buy High-Tech. They buy productivity, productivity does not need to have a silicon chip. We are in a basic material type business and have raised productivity by 100% based on labor cost per unit over the last 25 years. We have accomplished this by using bigger,more efficient tools, and equipment. Our accounting department has increased their productivity with all there computers and software, but not even close to the non-high tech part of the business,they do however kill a lot more tree's. The basic problem all aircraft makers have is that in 90% of the cases that I have looked at, increased cost is not exceeded by increased productivity. I love aviation but it is, in most cases a luxury. If a salesman in Florida has a choice between $100 of gas, a $300 airline ticket, or a $750 Dayjet flight, he/she will probably be putting in a lot of windshield time. From my perspective as a business owner the IRS drastically increased costs with their new personal use rules enacted aprox. 2 years ago. At 1 million eclipse might average 400 per year, at 2 million? Maybe 100-150. Just an opinion.

WhyTech said...

Gunner said:

"Vern evidently keeps believing that if he can just limp enough planes out of the factory, the original plan will kick in and Orders will start flowing."

Not going to happen. What Vern has failed to take into account is what some in high tech martketing have called the "whole product." This means that there is more to the product than just the physical airplane. It includes a qualified, current, and proficient pilot. Becoming and remaining such a pilot takes a certain level of smarts, commitment, attitude, and money. These are things that would-be buyers dont have in numbers large enough to make the high tech martket creation model work for a $2mm jet, or even the $100K Cessna Sky Catcher. With an iPod or lap top, the initial dollar commitment is small, and there is no risk to life and limb if you put it aside for months or years.

Yes, one might hire a pilot to fly the airplane, but those who can do this already own Hawkers, Citations, etc, or fractional shares.


Gunner said...

Agreed. In the class of aircraft we're talking about, personal purchase decision really is predicated on the "I want to be a pilot" statement, far more than, "I want to own a plane".

I cannot count the number of people who have asked me about these "new VLJ's" with serious initial interest in looking into them. When I suggest that they buy $200-300K in Charter Card value and try as hard as possible to spend that amount over the next year, the point sinks in pretty quick.

Unless your company can truly afford to rationalize a real BizJet, you'd have to really WANT TO FLY to buy anything from a Mustang on down. And there are just not enough of us out there to make that commitment.

Eclipse, Adam, D-Jet, The Jet, Epic...right up to Mustang at the margin: by definition, these will never be high demand non-owner flown aircraft. You've made that point for a year now and I think you're spot on.


Black Tulip said...

Eclipse Aviation...

"We don't have time to do it right, but we do have time to do it over."

(But will time run out.)

Gunner said...

Thanks much for the glimpse into a story that should be called "Snatching Failure from the Jaws of Victory", IEF.

As I said before:
Why wait till tomorrow, when you can begin to lower expectations today? That's the beauty of it.

gadfly said...

9 Z

You said: “My take is that the missing 1,900 "buyers" don't exist, never did, and likely never will.”

Reminds me of an old story, told to me by my Grandpa:

‘Seems the first kid had a sack of something . . . and the second kid says, “Whatcha’ got in the sack?”

“Smart Pills!”

“Give me some.”, says the second.

“No way!”, says the first.

“I’ll give you a nickel!”

“Well, OK, . . . but just one handful!”

After tasting some, the second spits them out and says, “Those are rabbit pellets!”

“See, you’re getting smarter already!”


gadfly said...

Things to consider, as we proceed into the new year:

“There ought to be a law” . . . that the legal disclaimer spoken at about 8x speed at the end of a commercial should be spoken at “normal speed”, and easy to understand in plain English. Somehow, a disclaimer is an outright announcement that there is something to hide.

Is it my imagination? . . . or is the same method “creeping” into the current discussion?

Somehow, “creeping” seems to be one of those golden English words, that express much more than face value.

As a part-time artist, it is a delight to “paint pictures” in the Queen’s English . . . a language of subtle innuendos, with the ability to kill, in painless and clever methods . . . causing the victim to both laugh and die in a single phrase . . . or stroke of the pen.

Eclipse . . . thank you for a “canvas” on which to “paint” . . . it is a pleasure!


(‘Yeh, I know . . . it’s a keyboard and mouse, but “stroke of the pen” conveys a much deeper hue! . . . a finality of thought, a completion of intent . . . and we await that stroke that says, “This jet is complete!” . . . with no disclaimers.)

flyger said...

baron95 said...

However, for this new class of personal planes (less than 6 seats), modern very reliable turbofans, light generators, enhanced battery for backup power, balistic parachute, advanced glass designed for single pilot operation, advanced training, mentoring programs, and the 15 year liability cap, I think liability will be a containable factor.

It isn't just the airframe maker who faces this liability, it is also the engine maker. Both of them have to be comfortable with an SEJ. The engine makers are not interested in taking on significantly more liability for half the revenue. Why would they?

Add to that $100 oil $10 jet fuel in many parts of the world and $7 here, and the economics of the single engine jet just trounce the twn config in the 4-5 pax/5,000lbs class.

Again, I think you are not seeing the whole picture here. A twin jet might actually have *better* fuel economy than a single. Sounds bonkers, doesn't it? Well, for one thing, it is going to be quite hard to certify an SEJ above FL250 for various redundancy requirements in the pressurization systems (this is easily met with two engines). If the SEJ is limited to FL250 (as Diamond has already stated theirs will be, they know the rules and Eclipse and Piper seem to be confused about this), then the increased fuel flow negates the single engine advantage. Further, adding two jet engines does not double your fuel flow like adding two piston engines does. They "add" better than piston airplanes. Lastly, the single engine has to be bigger and it will cost more, weigh more, and burn more fuel than one of a pair of twin engines. Thus the benefit is not a factor of two, it is more like about 30%. That's simply too small to win on the total balance sheet.

Someone who has a less than complete understanding of airplanes always thinks one engine will be more economical. This works well for piston airplanes. But for jets, this ain't necessarily so. The various regulations and laws of physics make an SEJ quite a challenge if you want it to be truly more efficient than a twin jet.

P.S. I've read that a PWC or Williams exec said they'd not sell a turbfan for single-engine jets unless it had a chute.

Let me know where you read that. A chute is highly impractical for jets due to the high speeds (both indicated and true). It will weigh a lot and impact the airframe design at all levels. The chute hasn't helped Cirrus which has a less than admirable fatal accident rate. I can believe that PWC and Williams wouldn't want their engines in an SEJ, but I question the chute connection.

On the PW600 TCDS, note 10 says the engine is approved only for multiple installations. I don't know if this is driven from regulatory requirements or from PWC. I didn't find a similar note in the FJ33 TCDS (the engine used in the Eclipse SEJ). One imagines Williams would exercise control over that as well even though it isn't in the TCDS.

In short, there are substantial challenges in building an economical SEJ. It is not nearly as simply as it appears.

bill e. goat said...

(see Stan's new thread)

gene said...

Where are the Eclipse ? Look at FlightAware.com for the eclipse type (EA50) and there are very few there. Compare to the Cessna Mustang C510 (claimed 40 delivered in 2007)and you see a few every day (non-demo). If Eclipse delivered 100 where are they? (factor out the Day Jet ones)

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